Karis v Digital CC Management Pty Ltd (No 3)

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FEDERAL COURT OF AUSTRALIA

Karis v Digital CC Management Pty Ltd (No 3) [2024] FCA 738

File number: WAD 60 of 2022
Judgment of: BANKS-SMITH J
Date of judgment: 9 July 2024
Catchwords: PRACTICE AND PROCEDURE - application for summary judgment, to strike out pleadings and for security for costs - where a number of factual and legal issues require determination - where claim based on a series of representations said to be conduct within s 18 of the Australian Consumer Law - where evidence relating to two alleged representations is interconnected - whether appropriate that limitation period issue be resolved summarily - whether appropriate that conduct said to be relevant to equitable relief be determined summarily - whether appropriate that contested issues of corporate authorisation and knowledge be determined summarily - whether agreement executed as a deed - application of principles as to summary judgment - summary dismissal of applicant's claims not appropriate and respondents' onus not met - leave granted to applicant to re-plead parts of claim - claims not struck out - applicant resides overseas - security for costs ordered - quantum and timing of order
Legislation:

Competition and Consumer Act 2010 (Cth) Schedule 2 (Australian Consumer Law) ss 4, 18, 31, 236, 237, 243

Corporations Act 2001 (Cth) s 711

Federal Court of Australia Act1976 (Cth) ss 31A, 56

Federal Court Rules 2011 (Cth) rr 16.21, 19.01, 26.01

Cases cited:

400 George Street (Qld) Pty Ltd v BG International Ltd [2010] QCA 245; [2012] 2 Qd R 302

Australian Securities and Investments Commission v Cassimatis [2013] FCA 641; (2013) 220 FCR 256

Bell Wholesale Co Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1

Bendigo and Adelaide Bank Limited v Russo [2019] NSWSC 661

Bullabidgee Pty Ltd v McCleary [2011] NSWCA 259

C v Commonwealth of Australia [2015] FCAFC 113; (2015) 234 FCR 81

Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304

Cargill Consulting Ltd v BTAC Coal Pty Ltd [2019] FCA 2070

Chandrasekaran v Commonwealth of Australia (No 3) [2020] FCA 1629

Coles Supermarkets Australia Pty Ltd v FKP Ltd [2008] FCA 1915

Commissioner of Taxation vVasiliades [2016] FCAFC 170

Commonwealth of Australia v BIS Cleanaway Ltd [2007] NSWSC 1075

Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955

Davies v Minister for Urban Development and Planning [2011] SASC 87; (2011) 109 SASR 518

Etnyre v Australian Broadcasting Corporation [2021] FCA 610

Gentry Brothers Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405

Global Advanced Metals Pty Ltd v Metallurg Inc [2017] WASCA 188

Hausman v Abigroup Contractors Pty Ltd [2009] VSCA 288; (2009) 29 VR 213

Henjo Investments Pty Ltd v Collins Marrickville (1988) 39 FCR 546

Henville v Walker [2001] HCA 52; (2001) 206 CLR 459

Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited [2008] FCAFC 60; (2008) 167 FCR 372

Karis v Digital CC Management Pty…

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Details
Case
[2024] FCA 738
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, the case of Karis v Digital CC Management Pty Ltd (No 3) involved the plaintiff, Mr Karis, who filed a claim against the defendants, Digital CC Management Pty Ltd and DigitalX Group Pty Ltd, regarding alleged misleading or deceptive conduct under the Australian Consumer Law. The defendants sought various orders including summary judgment, to strike out parts of the plaintiff's pleadings, and for security for costs. The court needed to decide whether certain issues, such as the limitation period, corporate authorisation, and knowledge, could be resolved summarily, and if the plaintiff's claims could be struck out. Additionally, the court had to consider whether the plaintiff, who resides overseas, should be ordered to provide security for the defendants' costs.

The legal issues focused on the appropriateness of resolving certain factual and legal matters summarily, the application of the principles for summary judgment, and the consideration of ordering security for costs given the plaintiff's status as a non-resident. The court examined whether the plaintiff's claims had no reasonable prospect of success and whether the defendants had met their onus to demonstrate this. The reasoning involved weighing the complexities of the case, the plaintiff's impecuniosity, and the risk of unjust enrichment of the defendants if security was not ordered.

The court determined that summary dismissal of the plaintiff's claims was not appropriate as several factual and legal issues required full determination. The court also held that the defendants had not met their onus to show that the plaintiff had no reasonable prospect of success on his claims. However, the court granted the plaintiff leave to amend his pleadings to specify the defendants alleged to have made certain representations and to detail the facts supporting these allegations. Finally, due to the plaintiff's status as a non-resident with no assets in Australia, the court ordered the plaintiff to provide security for the defendants' costs of the proceeding in the amount of $150,000, payable within 28 days. The proceeding was to be stayed pending the payment of this security, and the defendants' interlocutory application was otherwise dismissed. Costs of the application were reserved.

Orders

Orders of the court

1. The applicant provide security for the first and second respondents' costs of the proceeding for the period until the completion of discovery and court-directed mediation in the amount of $150,000 by payment into Court or in a form satisfactory to the Registrar within 28 days of the date of this order.

2. The proceeding (but not the cross-claim) be otherwise stayed pending payment of security.

3. The applicant have leave to amend his pleading in order to specify the respondents alleged to have made each of the Bonus Representation and the Trading Account Representation, and to set out the facts relied upon by him in that regard.

4. The first and second respondents' interlocutory application is otherwise dismissed.

5. Costs of the application reserved.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The effect of the applications referred to in the preceding paragraph is that even if successful, the part of Mr Karis's claim that relates to the Executive Employment Agreement would remain on foot. Presumably it is partly because of this that the first and second respondents seek security for their costs of the proceeding.The evidence For the purpose of this application, the respondents rely on affidavits of Mr Matthew Keating, a solicitor acting for the respondents, and Mr Jonathon Carley, the chief operating and financial officer of the DigitalX Group and director of both the first and second respondents. Mr Karis relies on his own affidavits provided earlier in the proceeding.Principles - summary judgment Section 31A of the Federal Court of Australia Act includes the following:31A Summary judgment(1)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a)the first party is prosecuting the proceeding or that part of the proceeding; and(b)the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.(2)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a)the first party is defending the proceeding or that part of the proceeding; and(b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:(a) hopeless; or(b) bound to fail;for it to have no reasonable prospect of success.(4)This section does not limit any powers that the Court has apart from this section. It is s 31A(2), rather than s 31A(1), which is of relevance to the respondents' application referred to at [23(a)] above. Section 31A(1) is relevant to Digital CC Management's application by cross-claim referred to at [23(c)]. Rule 26.01 of the Federal Court Rules also sets out circumstances in which a party may apply to the Court for an order for summary judgment:(1)A party may apply to the Court for an order that judgment be given against another party because:(a)the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or(b)the proceeding is frivolous or vexatious; or(c)no reasonable cause of action is disclosed; or(d)the proceeding is an abuse of the process of the Court; or(e)the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding.…(4)If an order is made under subrule (1) dismissing part of the proceeding, the proceeding may be continued for that part of the proceeding not disposed of by the order. The principles relating to these powers are well settled. The principles are set out in cases such as Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118; Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955; Rana v Google Australia Pty Ltd [2013] FCA 60; and C v Commonwealth of Australia [2015] FCAFC 113; (2015) 234 FCR 81.

Decision

Reasons for decision

Section 31A of the Federal Court of Australia Act includes the following:31A Summary judgment(1)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a)the first party is prosecuting the proceeding or that part of the proceeding; and(b)the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.(2)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a)the first party is defending the proceeding or that part of the proceeding; and(b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:(a) hopeless; or(b) bound to fail;for it to have no reasonable prospect of success.(4)This section does not limit any powers that the Court has apart from this section. It is s 31A(2), rather than s 31A(1), which is of relevance to the respondents' application referred to at [23(a)] above. Section 31A(1) is relevant to Digital CC Management's application by cross-claim referred to at [23(c)]. Rule 26.01 of the Federal Court Rules also sets out circumstances in which a party may apply to the Court for an order for summary judgment:(1)A party may apply to the Court for an order that judgment be given against another party because:(a)the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or(b)the proceeding is frivolous or vexatious; or(c)no reasonable cause of action is disclosed; or(d)the proceeding is an abuse of the process of the Court; or(e)the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding.…(4)If an order is made under subrule (1) dismissing part of the proceeding, the proceeding may be continued for that part of the proceeding not disposed of by the order. The principles relating to these powers are well settled. The principles are set out in cases such as Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118; Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955; Rana v Google Australia Pty Ltd [2013] FCA 60; and C v Commonwealth of Australia [2015] FCAFC 113; (2015) 234 FCR 81. In Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited [2008] FCAFC 60; (2008) 167 FCR 372 at [124], Gordon J noted that s 31A was introduced in order to extend 'the power of the court to deal with unmeritorious matters by broadening the grounds on which federal courts can summarily dispose of unsustainable cases' (citing the Minister's Second Reading Speech of the relevant bill). Even so, the power to give summary judgment for one party against another is not to be exercised lightly: Spencer at [24] (French CJ and Gummow J), [60] (Hayne, Crennan, Kiefel and Bell JJ); and Tropical Reef Shipyard Pty Ltd v QBE Insurance (Australia) Ltd [2011] FCAFC 145 at [31] (Edmonds, Jessup and Robertson JJ).

Ratio Decidendi

Legal Principle Established

Against that background, the authorities have established a number of matters that guide the exercise of the discretion. They are usefully summarised by Abraham J in Etnyre v Australian Broadcasting Corporation [2021] FCA 610 at [8]-[17] and I respectfully adopt without repeating her Honour's summary. Of particular relevance in this case are the facts that Mr Karis is a natural person and not a corporation, and that he resides overseas. It has been recognised that although courts are disinclined to order security against natural persons, as Lindgren J observed in Knight v Beyond Properties Pty Ltd [2005] FCA 764 at [32]‑[33], being a natural person is no bar to an order for security for costs, particularly when coupled with other factors. Those factors include the impecuniosity of the applicant and whether impecuniosity would stifle the litigation, and the complexity and bona fides of the matter, acknowledging (adopting the comments of Spender J in Staff Development & Training Centre Pty Ltd v Commonwealth of Australia [2005] FCA 1643 at [13]), that a security application is not the time for detailed argument as to the merits of the case. That an applicant is resident outside of Australia is ordinarily regarded to be highly relevant, although not determinative. In PS Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321, McHugh J stated (at 323):To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, for over 200 years the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction. In Logue v Hansen Technologies Ltd [2003] FCA 81; (2003) 125 FCR 590 at [18], Weinberg J explained that the clear rationale of this principle is:… to create a fund within this country against which a successful respondent may enforce a judgment for costs thereby enabling the avoiding of the risks, uncertainties and delays of attempting to enforce such a judgment in the applicant's claimed country of residence … There are a number of more recent examples in this Court where security was ordered on the basis that the relevant person was a non-resident with minimal assets in the jurisdiction: Wikeley v Kea Investments Ltd [2024] FCA 631 (Dowling J); Stapleton v Fairfax Media Publications Pty Ltd [2019] FCA 1418 (Flick J); and Etnyre v Australian Broadcasting Corporation.THE TRADING ACCOUNT REPRESENTATION - SUMMARY JUDGMENT